Mortgage payment for a three-bedroom house: $2,500. Gas for their Jeep Commander and Ford F-150 truck: $440. (“The Jeep was a mistake. We shouldn’t have bought it; we could have used the extra money for travel.”) [...]Cleaning lady: $160. Groceries: $1,000. (“We like Whole Foods and try to eat organic as much as we can. We love the new Leslieville store Hooked for fish. For everything else, Loblaws.”)[...]Wine: $400–$500. (“We try to get the better $11 bottles, but they go fast.”) Eating out: $400. Home phone, cable, Internet and two cellphones: $280. Dry cleaning: $50. Haircuts, nails and waxing: $170

RRSPs and investments: $0. (“Ha! We live month to month. When we have money left over, we go out.”)

Oh my. An RRSP is similar to an IRA.

Note from admin alex. The guidelines for this forum (copied below) do not allow for generalized complaints about the actions of other people. I have locked the thread.

Personal Finance

This subforum is for personal financial issues that don't involve investments. Examples of acceptable topics are:

If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:...discussions of the crimes, shortcomings or stupidity of other people, whether they be political figures, celebrities, CEOs, Fed chairmen, subprime mortgage borrowers, lottery winners, federal "bailout" recipients, poor people, rich people, etc. Of course, you are welcome to talk about the stupid financial things you have done.

We all like watching train wrecks, but the discussion of train wrecks goes on a train spotting forum. Now if you want to tell us how stupid you are, feel free.

The economy needs a lot more people like the family in the article. They use all available income for consumption. People like these spending lots of money in the economy makes for stock market rallies.

Think of all the economic activity they've stimulated by their spending--the wine, the autos, the day care provider, the groceries--it's great for the economy.

It might actually even be a personally rational use of their money if one speculates that we are in an environment in which future real returns across all asset classes may be low (i.e. high stock market level, low fixed income interest rates, high anticipated inflation). Their biggest asset is their personal labor capital and there's nothing in the article to suggest they're wasting it or failing to fully exploit it.

$440 on gas for two cars isn't that extreme either. I drive 70 miles a day round-trip to work. Every time I fill up, it is about $40. I fill up about 6 times a month, so it is $250 for gas for me for one car.

$280 for cable, internet, cellphones isn't that extreme either. I know co-workers who pay $150 on their unlimited cellphone planes. Add another $100 for the triple-play cable, internet, telephone.

Toronto is also a pretty popular city - most places in the US, if you're living in a comparably popular city, if you've got a family of 4, $200k pretax will leave you with few extravagances if you're also saving for retirement.

Now $200k after-tax is world of difference.

Maybe I'm getting more jaded, but I wasn't horrified at any of the expenditures I saw there. Sure, there are a few that I'd consider needless luxuries, but I'm sure if you count my own personal foibles, I'd have similar things that people would shake their head at, and I'm frugal enough at baseline to easily survive and even save on $19k/yr for two people when I was a medical student. For example, I probably spend close to $2k/yr on fitness for myself between races, bike gear, gym fees, travel & hotel, etc. and that sum can rise as high as $5k/yr when I'm big time racing. I'm sure the folks I would criticize in that article would look at my budget and feel the same way about that item in my budget.

My favorite part of the article is this quote: “The Jeep was a mistake. We shouldn’t have bought it; we could have used the extra money for travel.”

Yes, travel is a much more sensible idea than putting money into their 401K/IRA equivalent. I obviously don't know these folks, but that comment makes me think they would be in the same place (living month-to-month) even if they were making $400K. It goes out as fast as it comes in.

linuxuser wrote:Actually $2500 for a mortgage isn't that outrageous to me.

$440 on gas for two cars isn't that extreme either. I drive 70 miles a day round-trip to work. Every time I fill up, it is about $40. I fill up about 6 times a month, so it is $250 for gas for me for one car.

$280 for cable, internet, cellphones isn't that extreme either. I know co-workers who pay $150 on their unlimited cellphone planes. Add another $100 for the triple-play cable, internet, telephone.

It is the other "stuff" that they need to look more closely at.

Actually, I didn't see anything that was particularly extravagant. Just lots of "nice to have" expenses...and they simply have too many of them. Maybe too much house, too much on daycare, too much on nice food and restaurants. They didn't list vacations, nor did they list healthcare costs, nor did they list car payments.

They don't seem out of balance on any one item - for example very expensive exotic vacations or hugely expensive private school tuition for the kids - just lots of nice stuff that adds up. Obviously, they need to be earning $275,000 to afford their lifestyle.

sscritic wrote:We now have a convenient link to forum policies in the upper right.

Did you report it? There's a convenient link to do that these days as well. It would seem to be a more direct way of determining its "legality" than posting in a follow-up.

Brian

Have commenters been stressing the stupidity of these people? If you think they have been, then you report them. I wasn't trying to determining its "legality," I was reminding people of what our standards are for a reasoned discussion so we didn't get off track [train wreck reference for those who don't catch such things on first reading].

market timer wrote:Since they are paying $30K/year in daycare fees, I think it would make sense for one of them to stay home or work part-time.

I would not expect this comment from you. Assume that you are married with children, spending $30k/year on childcare. You and and your wife are well-educated, in the early phases of your careers, making about $100k/year each. Would it make sense for either one of you to drop out of the workforce just as your education is starting to pay off and at the time when the rest of your professional life is being determined?

market timer wrote:Since they are paying $30K/year in daycare fees, I think it would make sense for one of them to stay home or work part-time.

I would not expect this comment from you. Assume that you are married with children, spending $30k/year on childcare. You and and your wife are well-educated, in the early phases of your careers, making about $100k/year each. Would it make sense for either one of you to drop out of the workforce just as your education is starting to pay off and at the time when the rest of your professional life is being determined?

Victoria

I'll just add that even if your education is not paying off quite yet and you are spending more on daycare than one of the spouses makes (after taxes and expenses related to employment), it can still make sense to do the daycare thing. Because eventually those kids will be in school, and it might be very difficult to even get back into a field let alone make up for those early career years.

It's a difficult decision.

"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep

Also obvious, but easy to forget, is that costs of living are simply higher in places like Toronto, or the major metro of USA. I looked at a lot of their costs, and they're pretty typical for major metro. Yes, high compared to parts of Midwest and rural America, but not bad at all compared to NYC or SF.

Of course, I fully expect folks to argue that "well just move!" but it usually isn't as simple as coming down to saving dollars. Often, moving to the 'cheaper' areas of urban means a big sacrifice in public education and community resources, or possibly even safety. And moving out of town can be impossible if your job ties are to the area.

As said, I wasn't too surprised by any of their expenditures given that they live in Toronto - I'd bet that a lot of folks here, if residing there, would have similarly high bills and expenditures for mortgage, cell phone, etc.

lightheir wrote:Also obvious, but easy to forget, is that costs of living are simply higher in places like Toronto, or the major metro of USA. I looked at a lot of their costs, and they're pretty typical for major metro. Yes, high compared to parts of Midwest and rural America, but not bad at all compared to NYC or SF.

Of course, I fully expect folks to argue that "well just move!" but it usually isn't as simple as coming down to saving dollars. Often, moving to the 'cheaper' areas of urban means a big sacrifice in public education and community resources, or possibly even safety. And moving out of town can be impossible if your job ties are to the area.

As said, I wasn't too surprised by any of their expenditures given that they live in Toronto - I'd bet that a lot of folks here, if residing there, would have similarly high bills and expenditures for mortgage, cell phone, etc.

Some of the food expenditures made my eyes boggle out($1200/month for food, $1400 for eating out, and $800 for wine...for 1 person ) as well as the $1k/month on clothing, but the bigger factor is that these people do not seem to be going into debt because of their lifestyle. For instance, I do not see vehicles they can not afford. They are high earners and live comfortably, but many people live the exact same way with much less income. Maybe not the ideal way to set up their financial future, but I was expecting a whole lot worse when I clicked the link. I think all of us see greater examples of financial irresponsibility every day.

lightheir wrote:Also obvious, but easy to forget, is that costs of living are simply higher in places like Toronto, or the major metro of USA. I looked at a lot of their costs, and they're pretty typical for major metro. Yes, high compared to parts of Midwest and rural America, but not bad at all compared to NYC or SF.

I agree that the cost of living in a large city is higher, and people are paying extra for the quality of their urban life. However, a salient feature of the profiled families and their budgets is that they have everything, as opposed to prioritizing their needs and wants and budgeting accordingly.

For example, if a family lives in an expensive condo or apartment in a central location of a city with excellent public transportation, why would it also need several cars? If someone buys expensive organic produce -- something that I do, -- also paying for frequent in-organic restaurant food is a contradiction.

Having a second home (e.g., a cottage, a house for a former spouse) is usually a significant financial drain, irrespective of other choices. Frequent short vacations are much more expensive than one or two long ones; and frequent vacations are more disruptive and stressful. If one is already paying for the life in a metropolis of his choice, then escapes to other locales should not be needed; this is in contrast to living in a cheap boring locale and using the saved money on the escapes.

This is in the forum policy as well: "If you feel that someone has attacked you or otherwise violated the policies of this forum, do not respond in kind. Instead, contact a Moderator or Site Administrator by PM and ask them to review the problem posts."

market timer wrote:Since they are paying $30K/year in daycare fees, I think it would make sense for one of them to stay home or work part-time.

I would not expect this comment from you. Assume that you are married with children, spending $30k/year on childcare. You and and your wife are well-educated, in the early phases of your careers, making about $100k/year each. Would it make sense for either one of you to drop out of the workforce just as your education is starting to pay off and at the time when the rest of your professional life is being determined?

Victoria

It might make sense,if you live a sensible lifestyle. Money does not buy happiness sometimes it helps,but not always

lightheir wrote:Also obvious, but easy to forget, is that costs of living are simply higher in places like Toronto, or the major metro of USA. I looked at a lot of their costs, and they're pretty typical for major metro. Yes, high compared to parts of Midwest and rural America, but not bad at all compared to NYC or SF.

I agree that the cost of living in a large city is higher, and people are paying extra for the quality of their urban life. However, a salient feature of the profiled families and their budgets is that they have everything, as opposed to prioritizing their needs and wants and budgeting accordingly.

For example, if a family lives in an expensive condo or apartment in a central location of a city with excellent public transportation, why would it also need several cars? If someone buys expensive organic produce -- something that I do, -- also paying for frequent in-organic restaurant food is a contradiction.

Having a second home (e.g., a cottage, a house for a former spouse) is usually a significant financial drain, irrespective of other choices. Frequent short vacations are much more expensive than one or two long ones; and frequent vacations are more disruptive and stressful. If one is already paying for the life in a metropolis of his choice, then escapes to other locales should not be needed; this is in contrast to living in a cheap boring locale and using the saved money on the escapes.

Victoria

Totally agree with you. There are plenty of areas to pare things down in their costs.

Still, overall not bad at all. Certainly nowhere near as bad as financial damage caused by someone going through a typical divorce, which sums about 50% of married folks in the US noawadays.

VictoriaF wrote:Having a second home (e.g., a cottage, a house for a former spouse) is usually a significant financial drain, irrespective of other choices. Frequent short vacations are much more expensive than one or two long ones; and frequent vacations are more disruptive and stressful. If one is already paying for the life in a metropolis of his choice, then escapes to other locales should not be needed; this is in contrast to living in a cheap boring locale and using the saved money on the escapes.

Victoria

Many "upper-middle class" Canadians (Torontonians in particular in my experience) seem to consider "the lake cottage" an essential - Canada is a fine country for it though - 3 months of the year .

However, don't know if any of the people have company pensions, what their SS is like and so on......

But would a dull article about $200,000 salaries with people living more frugally and saving more be a more interesting read for the masses? No, and that's why the article was written that way - so more people would read it.

RM

I figure the odds be fifty-fifty I just might have something to say. FZ

jenny345 wrote:What is really interesting is that in Canada the households making 196K are in the top 1%. Is that annual income even in the top 5% in the U.S.?

Yes it is.

The following is presented as information relevant to spending strategies, not as part of a political comparison of Canada to the U.S.

Even if the high income range is lower in Canada than in the U.S. and even if taxes are higher, some other factors should be considered.

In Canada, whatever income and savings you have is free and clear of future health care costs, since that is covered by the taxes one pays. There are exceptions for add-ons like semi-private rooms and the like. But, the basic expenses are covered.

If living in downtown Toronto or reasonably close the city centers of most Canadian cities, cars are frequently optional, due to the availability of public transportation. Not having a car can shave $10K of one's after-tax expenditures.

When I last checked, the cost of assisted living facilities in Ontario was capped at about $22K a year, which diminishes the need for long term care insurance.

Higher education is heavily subsidized thereby diminishing the need for middle class families to save six-figure sums for their children's university educations.

If planning to retire early, there is no need to allocate funds for retiree health insurance, since the Canadian system covers one from cradle to grave. In contrast, the need to obtain health insurance to get coverage between the ages of 55 and 65 is a major retirement cost consideration in the U.S.

I mention to the above to help reach a more realistic tally of the benefits and expenses of living in Ontario versus, say, California. Salaries alone don't paint the whole picture.

Last edited by lawman3966 on Sun Feb 26, 2012 8:52 pm, edited 1 time in total.

Toronto is also a pretty popular city - most places in the US, if you're living in a comparably popular city, if you've got a family of 4, $200k pretax will leave you with few extravagances if you're also saving for retirement.

Now $200k after-tax is world of difference.

Maybe I'm getting more jaded, but I wasn't horrified at any of the expenditures I saw there. Sure, there are a few that I'd consider needless luxuries, but I'm sure if you count my own personal foibles, I'd have similar things that people would shake their head at, and I'm frugal enough at baseline to easily survive and even save on $19k/yr for two people when I was a medical student. For example, I probably spend close to $2k/yr on fitness for myself between races, bike gear, gym fees, travel & hotel, etc. and that sum can rise as high as $5k/yr when I'm big time racing. I'm sure the folks I would criticize in that article would look at my budget and feel the same way about that item in my budget.

lightheir wrote:Also obvious, but easy to forget, is that costs of living are simply higher in places like Toronto, or the major metro of USA. I looked at a lot of their costs, and they're pretty typical for major metro. Yes, high compared to parts of Midwest and rural America, but not bad at all compared to NYC or SF.

Of course, I fully expect folks to argue that "well just move!" but it usually isn't as simple as coming down to saving dollars. Often, moving to the 'cheaper' areas of urban means a big sacrifice in public education and community resources, or possibly even safety. And moving out of town can be impossible if your job ties are to the area.

If you believe markets are efficient and most people on this board do, then higher COLAs are largely a reflection of NYC being a more desirable place to live than the Midwest. You can't adjust for the cola to compare people's standard of living. Even in Toronto, I would think they could spend less on food, wine, and daycare, but it's not my place to try to give them advice.

I am trying desperately to make a $120k annual cash budget work.....definitely not easy for a family of 4. 1st world problems for sure, but about 10k of that is straight out the door on various forms of insurance. Another 10k or so aggregate on childcare. It adds up quick.

I think, in an emergency, cutting down to 90k or so would be pretty easy, as one would drop the insurance and various educational costs....but it seems imprudent to do so when not necessary.

Having lived with a family of 6 people on an annual average of $30-$40k gross for most of the past 20 years, such articles always bring a chuckle. Of course things cost a lot more in a downtown city rather than a rural area. But in many of these articles, "don't buy the things that you want, settle for less or make do without" seems to be a foreign concept that cannot be grasped, and that is what makes me laugh.

sir, some of it is unavoidable, and further, its easier (fairer) to talk about cash out the door than it is "salary.". My wife made 90k in salary in 2010, but we ended up netting about 16k after taxes and childcare.

Only thing i would say is this, don't think you would be amazingly noticeably wealthier if your salary was 200k versus 50k. Having traversed the extremes, i can tell you that after about 70k per year the incremental impact is more minor than you would expect. And, further, accumulation of meaningful wealth requires an astounding annual income, with unusual savings rates, over two decades.

The suggestion that this post might be locked is an irresistible inducement to comment.

Because these people are Canadian, at least they'll be able to retire, unlike most Americans after American Medicare croaks.

It makes sense to view a Toronto home as a better investment than anything you can put in an RRSP. Just as the Canadians as a country sell their natural gas and oil abroad instead of keeping it in the ground for the use of future generations of Canadians, so too the couple being highlighted tries to strike a balance between investment (their property) and enjoying the present.

I also agree with lawman3966 and PreserveCapital, who wrote:

The economy needs a lot more people like the family in the article. They use all available income for consumption. People like these spending lots of money in the economy makes for stock market rallies.

bridenour wrote:I am trying desperately to make a $120k annual cash budget work.....definitely not easy for a family of 4. 1st world problems for sure, but about 10k of that is straight out the door on various forms of insurance. Another 10k or so aggregate on childcare. It adds up quick.

I think, in an emergency, cutting down to 90k or so would be pretty easy, as one would drop the insurance and various educational costs....but it seems imprudent to do so when not necessary.

Have you sat down and tracked your expenses for a few months? Try to figure out what are necessities (food, home, utilities, etc) and what might be more categorized as "keeping up with the Jones" (clothing for fashion reasons only, non-critical activities/trips, type of cars, etc). Analyze those optional expenses to see if having them is really worth having the money heartache at the end of the month. Then there are the needed expenses (and I'd consider insurance and education to fall into this category) which might have more frugal alternatives.

Looking at the numbers in "black and white" on paper or your computer screen can often give you ideas of what can be cut back on and what is truly essential, so you can prioritize spending appropriately. Of course, this works best when both spouses in a marriage are on the same page.

And here we see the fundamental dishonest characteristic of each and every article which advances this particular enraging argument. "Sure, it's an objectively large sum of money," they say. "But it is far smaller after I spend it."

Then there's $6k for wine (@$11/bottle = 545 bottles/year?!) and $17k on food.

$8k for cars/year is pretty reasonable, as is some of the other stuff. But those 3 are basically where they'd have to cut back to have any extra money. It should get better once their kids go to school, I assume, as that will save $30k/yr instantly.

bridenour wrote:Only thing i would say is this, don't think you would be amazingly noticeably wealthier if your salary was 200k versus 50k. Having traversed the extremes, i can tell you that after about 70k per year the incremental impact is more minor than you would expect. And, further, accumulation of meaningful wealth requires an astounding annual income, with unusual savings rates, over two decades.

This is an important point, something I noticed when I first started working. If you have a family and make anything less than around $400K, you can find a way to spend it on slightly nicer middle class amenities (Lexus vs. Toyota, ski trip to Austria vs. Vermont). We come to expect this new level of consumerism as wages grow.

On the other hand, one can put away far more money earning $200K than $50K. A single person earning $200K/year has the option to become financially independent in about 7 years, or commit to a lifetime of consumerism where corporate "rightsizing" can end it all immediately.

renditt wrote:Nothing surprising in these articles. You wouldn't be able to save much in a place like NYC on 10k per month if you have kids and have to pay for day care.

It depends on what your definition is of "much" for saving, but the median income for a full time, year round worker in NYC is only $46k for a guy and $42k for a female. Even in NYC, only 7% of families earn above $200k. Of course, that doesn't answer how many people have kids, but $200k is definitely an above average household income.

Then there's $6k for wine (@$11/bottle = 545 bottles/year?!) and $17k on food.

$8k for cars/year is pretty reasonable, as is some of the other stuff. But those 3 are basically where they'd have to cut back to have any extra money. It should get better once their kids go to school, I assume, as that will save $30k/yr instantly.

Nah, it sounds like $11 is the minimum they'd spend on a bottle, but only if they're lucky enough to find good stuff that cheap. Probably a bottle a day.

I'd say it's fair to call these people rich; they live a luxurious lifestyle with many amenities. It's not as though they're asking for sympathy, or anything; these are just their consumption choices. They would be more prudent if they set more aside for a rainy day, but they haven't crossed the line into debt. I do think the definition of rich has become ridiculously inflated. Not long ago the rich families in town had a nice house, nice car, nice clothes, a housekeeper, and probably a thriving business. That was enough to mark them as the rich people; they didn't need yachts and private jets and private islands to qualify.

Last edited by epilnk on Sun Feb 26, 2012 10:11 pm, edited 1 time in total.

Nah, it sounds like $11 is the minimum they'd spend on a bottle, but only if they're lucky enough to find good stuff that cheap. Probably a bottle a day.

I too thought that they spend more than $11 on each bottle of wine, because they cannot always find good $11 ones. But considering their level of consumption, would not it make sense to stack on good $11 bottles for several months at a time once they find them?

Victoria

Last edited by VictoriaF on Sun Feb 26, 2012 9:21 pm, edited 1 time in total.

market timer wrote:Since they are paying $30K/year in daycare fees, I think it would make sense for one of them to stay home or work part-time.

I would not expect this comment from you. Assume that you are married with children, spending $30k/year on childcare. You and and your wife are well-educated, in the early phases of your careers, making about $100k/year each. Would it make sense for either one of you to drop out of the workforce just as your education is starting to pay off and at the time when the rest of your professional life is being determined?

Victoria

There are certainly cases where it can make sense to preserve continuity of career at the expense of higher daycare fees. My gf is a low paid professor, and that is a case where I think career continuity should be prioritized. Most of the dual-income professionals I know have chosen to have the wife stay home, unless she was earning over $100K/year (and often when she was earning significantly more than that). It's definitely more of a lifestyle question than one of finances.

Well, I can sympathize with those people somewhat. Income has a way of getting spent.

With gross income in the same range and no kids, we clean the 4700 sq ft house ourselves. The 2 cats are confined to the second floor because we couldn't do it otherwise.

The mortgage payment on our mansion is 133% of theirs. A pending refi will bring that down to 124%.

I buy the $7.99 bottles of Bordeaux. My partner doesn't drink. We don't have a separate budget for wine, it's a small part of our grocery spending. Our total grocery budget is 60% of their $1000. We only go to Whole foods a couple times a year, typically it's Costco and Trader Joe's . We bake our bread and make our own yogurt.

Our utilities are only 40% of theirs, but that's thanks to a recent solar investment that still has about 6 years to pay off.

We have been spending the same amount on eating out as they have for years. It really adds up quickly. And we are trying to cut that down. This year I started packing my lunch to work, no more cafeteria or subway, that will take care of cutting it down by 1/3.

We both drive Priuses so our gas consumption is 40% of theirs even in pricey California. Gas was $4.25 today.

We don't dry clean, I don't actually own clothes that need to be dry cleaned.

I went to the $6.99 haircut place today and cut my own nails, no waxing necessary. So that doesn't really register on our spending.

Our car and home insurance is 110% of theirs.Our property taxes are more than triple theirs.

We do put a significant amount in 401k / IRA, about 15% of gross income, and they put 0%.

I don't see any healthcare spending listed. We spend about $13k, $11k is employer-subsidized premiums, but I have to pay taxes on half of it for my partner.

Speaking of taxes, I don't see them listed either, and that is a significant part of our spending.

Last edited by madbrain on Sun Feb 26, 2012 10:12 pm, edited 1 time in total.

VictoriaF wrote:I too thought that they spend more than $11 on each bottle of wine, because they cannot always find good $11 ones. But considering their level of consumption, would not it make sense to stack on good $11 bottles for several months at a time once they find them?

Victoria

Or even when they don't find them. If there are several $11/bottle wines that they've found they like, couldn't they arrange to order them by the case, through a store? If you figure that there are 10 different wines in that range that they like, we're talking 3 cases of each wine to cover the year.